On 8 June 2016, the Dutch Government issued a press release stating that two competent authorities agreements (the Agreements) have been signed with Switzerland regarding the application of the Netherlands–Switzerland double tax treaty (the Tax Treaty). The first agreement relates to the tax treaty entitlement of the Dutch fiscal investment institution regime, or in Dutch fiscale beleggingsinstelling (FBI), the Swiss Fonds Commun de Placement (FCP) and the Swiss Société d’Investissement à Capital Variable (SICAV). The second agreement relates the Dutch closed fund for joint account, or in Dutch fonds voor gemene rekening (FGR) and the Swiss limited partnership for collective capital investment (LP).
In the Agreement reference is made to issues raised in the OECD Commentary to the OECD Model Tax Convention and the tax treaty entitlement of CIVs. The Dutch and Swiss authorities agree that in principle the tax treaty entitlement of CIVs should be available in the case of investments through CIVs. However, the entitlement to benefits should be limited if these benefits would not have been available through a direct investment. Therefore, it is agreed that if more than 95% of the invested capital of an FBI, FCP or SICAV is contributed by tax treaty residents of the country in which the entity is established, the investment vehicle can claim the benefits of the Tax Treaty with regard to dividend and interest income derived from the other country.
In case less than 95% of the invested capital is contributed by Tax Treaty residents, the Tax Treaty benefits will be applied pro rata for the percentage of relevant Tax Treaty residents. Notwithstanding this, for the portion third country tax residents invest in the investment vehicles, tax treaty benefits of the treaty between that third country and the Netherlands or Switzerland can be claimed. Currently administrative procedures must be developed to apply the rules in practice. It is expected that these will focus on the administrative procedures and controls that will be required by the Dutch and Swiss authorities to be able to make a refund claim on behalf of the third country investors.
Finally, the investment vehicle, or its authorized representative should indicate based on data established at the due date of the withholding tax or at least once every year, the percentage of invested capital of the investment vehicle beneficially owned by Tax Treaty residents.
As a result of the Agreement, if an FGR qualifies as tax transparent based on Dutch tax law (also referred to as
a ”closed FGR”), the Swiss authorities will follow this classification for domestic and Tax Treaty purposes. In case a closed FGR is structured as an umbrella fund, it will also be regarded as tax transparent. The same applies with regard to an LP.
As a result of the tax transparency, all income and gains derived through a closed FGR or LP must be allocated to the investors in proportion to their participations in the vehicle.
It is agreed that if more than 95% of the invested capital of a closed FGR or LP is contributed by tax treaty residents
of the country in which the entity is established, the entity, represented by its fund manager or its depository, may claim the bene ts of the Tax Treaty or a third country tax treaty to which the Netherlands or Switzerland is a party and that is applicable to those investors on behalf of those investors in the closed FGR or LP. The Agreement furthermore describes certain procedures that should be taken into account.
The Agreements were signed on 14 March 2016. For the Agreement that relates to the FBI, the FCP and SICAV, it
is effective for all outstanding and future withholding tax reclaims. For the Agreement that relates to the closed FGR and LP, it is effective for withholding tax reclaims as of that date.